Will Morrison's Covid strategy work out politically for the Coalition?

IT may be a tad too early to make any firm conclusions about the resilience of Australia's economy just because the latest quarterly economic report last week showed a modest 0.7 per cent growth.

Most of that growth, in the three months to the end of June, was the result of huge infusions of public expenditure. State governments have been splurging on new hospital equipment, railway lines and roads amounting to more than A$29 billion (S$28.9 billion). Without this public investment, there would have been zero economic growth, perhaps even a contraction.

The other major factor behind the growth figure was the pandemic itself. The states, which are responsible for delivery of health services, spent big by adding manpower for more medical services. To be sure, consumers spent record amounts on clothes, shoes and home office equipment. And the real estate market continued to be buoyant. But without the governments' decisive intervention in the economy, the picture would have been markedly different. It is also important to note that the latest scorecard is a backward look at economic performance. Now, both Sydney and Melbourne, which together account for more than half of the country's output, are in various stages of shutdown. Other cities have also had to impose shutdowns to keep a lid on the spread of the virus. No surprise then that economists now warn that the nation's GDP could contract by 3-4 per cent in the third quarter ending September.